Global financial system is the system of regulators and institutions acting on international level. The key players are IMF (International Monetary Fund) and bank working for international settlements and various governments of different countries and finance corporations and other private financial institutions acting on an global scale.

The conventional and slamic banks, finance and leasing companies, money exchange establishments, investment/ brokerage companies, insurance companies and pension funds are the elements of financial system of Oman's economy.

Functios of Oman's economy

Sound licensing policy

Prudential regulations and supervision, act as means to maintain monetary and financial stability and contribute to the growth .The approach and practices, of course, undergo needed periodical reviews for improvement. Prudential requirements are set/re-set in response to changes in needs. The efforts of Cental Bank of Oman (CBO) will encompass the study of macroeconomic and sectoral dynamics in conjunction with financial soundness indicators and external developments to establish linkages and evolve a suitable model for the behavior of the financial system.

Robust Regulation

The conservative attitude of CBO has lead to the success of domestic sector. To stimulate the interbank market the regulator seekst to ease liquidity by allowing lenders to include deposits from domestic banks in calculating their loan-to-deposit ratio limit, which currently stands at 87.5%.

Conventional segment of the banking system

The conventional segment of banking consists of nine foreign banks (with 470 local branches and five overseas branches and representative offices) and seven local commercial banks and there are also leasing companies (43 branches), sixteen money exchange establishments (317 branches) doing money changing and issue of drafts and 36 money changers doing money changing only two specialized banks (23 domestic branches).

Financial Stability

Due to   geopolitical disturbances Oman’s banking sector faces a number of downside risks, leading to an unexpected decline in oil prices.Omani banks succeeded in growing their lending portfolios without a significant increase in gross non-performing loans (NPLs), which in 2018 stood at a modest 2.8% of total sector lending. This compares favourably with the NPL levels of regional peers such as the UAE (6.4%), Bahrain (5.9%) and Kuwait (2.2%).

Market Consolidation

When HSBC combined its Omani operations with Oman International Bank, there has only been a modest trend of mergers and acquisitions in the market.

In August 2018, the National Bank of Oman and Bank Dhofar announced they were exploring the possibility of a merger, creating an entity with $20bn in assets.

As profitability levels come under pressure and regulatory demands increase, there is growing potential for more mergers and acquisitions over the medium term.